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Internal audit transformation

Working with the internal and external auditor

Audit Committee Leadership Network, June 2018

Today’s internal audit functions are often challenged to perform both traditional assurance activities and new, value-creating tasks. As businesses consider new business models and integrate new digital platforms, internal auditors must adopt new approaches to testing risks and controls—which may be enabled in part by digital technologies. This environment, in turn, requires a new approach to recruiting and training people so that the internal audit function is staffed with the right mix of skills. Amid these circumstances, the audit committee, through its oversight responsibility, has an opportunity to help the chief audit executive (CAE) and the internal audit team deliver greater value for the broader organization.

On June 1, 2018, members of the Audit Committee Leadership Network (ACLN) met in Washington, DC, to discuss the evolution of the internal audit function. Ken Robinson, senior vice president of Exelon Audit Services, and Lisa Hartkopf, Americas internal audit leader at EY, joined members for the discussion.

This ViewPoints includes background information and synthesizes the perspectives that members shared before and during the meeting on the following topics:

The agenda of a digitally enabled internal audit function
Today’s business environment requires internal audit functions to monitor how technological innovation is changing their companies and to understand the corresponding changes to risks and controls. At the same time, internal audit can deliver new value by implementing and creating digital tools for the function itself and for the business. As internal audit functions uncover new opportunities to help their companies better understand the risks associated with certain changes, audit committee chairs stress the importance of these functions maintaining their focus on providing business assurance.

Talent and staffing approaches of the internal audit function
In today’s environment, internal audit functions need a broader range of skills, including experience with information technology as well as more traditional audit competencies. To achieve this mix of talent, organizations are taking advantage of a range of staffing approaches, drawing talent from other parts of the business or cosourcing responsibilities to third parties. Audit committee chairs noted that managing a more complex internal audit function, staffed with a wider range of skills, requires a skilled CAE with clout across the organization.

Audit committee oversight of internal audit
The audit committee’s oversight of internal audit is as important now as it ever has been. Audit committee chairs identified a range of practices that can help ensure a forward-looking internal audit team. These include encouraging assessments that go beyond the basics and truly benchmark performance, elevating the CAE’s position among management by demonstrating their respect for the executive in the role, and ensuring that the function has the resources needed to accomplish its mandate.